April 8th, 2013
Falling prices seem to inspire bullion buying
With equities markets around the world rallying in the first quarter of 2013, there was a pullback in commodities, namely in the realm of precious metals, as both gold and silver prices have suffered in recent months. But those declines haven’t dampened the demand for bullion among investors.
For starters, the U.S. Mint had to halt production of American Silver Eagles in January, as a rush of orders far surpassed the supply. Just how hot were the coins? Before the stop order was issued, the Mint sold 7.5 million Silver Eagles, an all-time monthly record that was only 2.4 million pieces short of all the Silver Eagles sold in 2007. Despite that production hiccup, many speculators resumed buying as soon as the Mint began issuing coins anew, as seen by the renewed spike in demand.
This interest comes even as commodities lag equities on the year. As of market close Friday, the spot price of silver came in at $27.11 an ounce, while gold settled just short of $1,595. At those prices, silver was down nearly 4 percent since the end of March, while gold has lost more than 1 percent over that span. A look at the bigger picture is even gloomier, as the precious metals have dwindled significantly since reaching all-time highs in 2011. For example, silver is off some 45 percent since hitting its record mark of $49.82 during intra-day trading back in April 2011, while gold is down about 16 percent since peaking at its top of $1,895 that September. In contrast, the S&P 500 is up more than 6 percent year-to-date, while the Dow Jones Industrial Average is up more than 8.5 percent and the NASDAQ has spiked nearly 3 percent in 2013.
While that may sound like grim news, some bullion buyers see the current trend as an opportunity. Speculators continue to amass stores of silver and gold, as bullion remains as desirable these days as it was during its peak. Many investors are searching for a way to offset fears about potentially high inflation and the concurrent devaluation of currencies, fears rooted in the way governments around the world continue to print seemingly endless amounts of money in the hopes of reigniting the global economy. Those apprehensions were heightened last week when the equities surge was met with grim economic news, highlighted by disappointing labor reports and stalled hiring in the private sector.
If that kind of data persists, it’s a safe bet many investors will lose their appetite for risk and will again look toward silver and gold bullion as a shelter from the potential economic storm brewing.